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Case Brief - Foss v Harbottle (1843)

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Company Law (ACCT 4610)

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Students shared 171 documents in this course
Academic year: 2020/2021
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Anson wu
香港科技大學
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Warning: TT: undefined function: 32 Warning: TT: undefined function: 32 Case Brief

Case Name: Foss v Harbottle

Citation: [1843] 67 ER 189, (1843) 2 Hare 461

Court: Court of Appeal

Coram: Wigram VC, Jenkins LJ

Plaintiff: Foss and Turton

Defendants: Thomas Harbottle & ORS

Facts Victoria Park Company was established in 1835 in relation to the acquisition of 180 acres (0 km2) of land near Manchester for the establishment of the Victoria Park, Manchester. Subsequently, the company was incorporated by “An Act for Establishing a Company for the Purpose of Laying Out and Maintaining an Ornamental Park within the Townships of Rusholme, Charlton-upon-Medlock and Moss Side, in the County of Lancaster" and Royal assent was granted on the 5 May 1837.

Richard Foss and Edward Starkie Turton were two minority shareholders in the company. They were of the view that the property of the company had been misapplied and wasted and various mortgages were given improperly over the company's property. They claimed against five company directors (Thomas Harbottle, Joseph Adshead, Henry Byrom, John Westhead, Richard Bealey); the solicitors (Joseph Denison) and the architect (Thomas Bunting and Richard Lane); and also H. Rotton, E. Lloyd, T. Peet, J. Biggs and S. Brooks, the several assignees of Byrom, Adshead and Westhead, who had become bankrupts.

Their claim were based on the following grounds: (i) fraudulent transactions under which the assets of the company were misapplied; (ii) there had ceased to be a sufficient number of qualified directors to make up a board; and (iii) the company had no clerk or office; and that in such circumstance the shareholders had no power to take the property out of the hands of the defendants who were directors except by commencing

litigation.

The reliefs being sought by the Plaintiffs include: (i) that the defendants should be held accountable to the company; and (ii) that a receiver should be appointed.

Result: The claim was dismissed.

It was held that: (1) The continuation existence of a board de facto must be intended; (2) The possibility of convening a general meeting of shareholders capable of controlling the acts of an existing board was not precluded under the action; (3) There was nothing to prevent the company from obtaining redress in its corporate character in respect of the matter complained of; (4) The Plaintiffs could not sue in a form of pleading which assumed the practical dissolution of the company. (5) The result of this case establishes that when a wrong doing is done to a company, even if the wrong doers are its directors, it is only the company that has standing to sue. (6) In effect the court established two rules: (i) The "proper plaintiff rule" – a wrong done to the company may be vindicated by the company alone; (ii) The "majority rule principle" – if the alleged wrong can be confirmed or ratified by a simple majority of members in a general meeting, then the court will not interfere. (7) However, there are certain exceptions to the rule in Foss v Harbottle, namely :- (i) ultra vices or illegal acts; (ii) transactions requiring special majorities; (iii) personal rights; and (iv) the “fraud on the minority” exception.

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Case Brief - Foss v Harbottle (1843)

Course: Company Law (ACCT 4610)

171 Documents
Students shared 171 documents in this course

University: 香港科技大學

Was this document helpful?
Case Brief
Case Name: Foss v Harbottle
Citation: [1843] 67 ER 189, (1843) 2 Hare 461
Court: Court of Appeal
Coram: Wigram VC, Jenkins LJ
Plaintiff: Foss and Turton
Defendants: Thomas Harbottle & ORS
Facts
Victoria Park Company was established in 1835 in relation to the acquisition of 180
acres (0.73 km2) of land near Manchester for the establishment of the Victoria Park,
Manchester. Subsequently, the company was incorporated by “An Act for Establishing
a Company for the Purpose of Laying Out and Maintaining an Ornamental Park within
the Townships of Rusholme, Charlton-upon-Medlock and Moss Side, in the County of
Lancaster" and Royal assent was granted on the 5 May 1837.
Richard Foss and Edward Starkie Turton were two minority shareholders in the
company. They were of the view that the property of the company had been
misapplied and wasted and various mortgages were given improperly over the
company's property. They claimed against five company directors (Thomas Harbottle,
Joseph Adshead, Henry Byrom, John Westhead, Richard Bealey); the solicitors
(Joseph Denison) and the architect (Thomas Bunting and Richard Lane); and also H.
Rotton, E. Lloyd, T. Peet, J. Biggs and S. Brooks, the several assignees of Byrom,
Adshead and Westhead, who had become bankrupts.
Their claim were based on the following grounds:
(i) fraudulent transactions under which the assets of the company were misapplied;
(ii) there had ceased to be a sufficient number of qualified directors to make up a
board; and
(iii) the company had no clerk or office;
and that in such circumstance the shareholders had no power to take the property
out of the hands of the defendants who were directors except by commencing

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